[Ip-health] American Prospect: Mankiw gets medical R&D all wrong

[Sarah Rimmington]

http://www.prospect.org/csnc/blogs/beat_the_press_archive?month=09&year=2009&base_name=someone_should_sell_gregory_ma
The American Prospect
Someone Should Sell Gregory Mankiw a $800 Million Laptop
By Dean Baker, Co-Director, Center for Economic and Policy Research


Based on his Sunday column on health care, he would probably buy it.
Mankiw touts the benefits of modern medicine, specifically noting how
statins may allow him to control the heart disease that took the life of
his father. He notes that statins cost a great deal to develop and then
asks whether the government would prevent him or some other fortunate
person from spending their money to benefit from statins and other great
medical breakthroughs.

Mankiw has turned the problem on its head. Once statins have been
developed, they are very cheap to produce. The question is not an
abstract one of whether anyone would have the government prevent Greg
Mankiw or Bill Gates from spending their money on statins, the question
is more concrete -- why does the government prevent many low and
moderate income people from buying statins in a free market?

In fact, the government has granted patent monopolies to developers of
statins. This means that it will arrest anyone who produces and sells
statins at their cost of production without the permission of the patent
holders.

In the current system patents provide an incentive to undertake research
into the development of new drugs, but that doesn't mean that patents
are the only mechanism to support this research. The federal government
spends $30 billion a year on biomedical research through the National
Institutes of Health (NIH). Virtually everyone, including the
pharmaceutical industry, agrees that this research is enormously valuables.

The government could increase its funding and support the development of
drugs (most of the NIH research is basic scientific research) and then
allow all new drugs to be sold at their free market price. In this case,
we would not have the sort of tough problems about denying care to
people that Mankiw describes.

In other sectors of the economy, like computers and cell phones,
technology has brought the price of goods down. It is only health care
where it has caused prices to explode.

--Dean Baker

Posted by Dean Baker on September 21, 2009 11:50 PM |

--
Sarah Rimmington
Attorney
Essential Action, Access to Medicines Project
Washington, DC
Tel: +1 (202) 387-8030
Cell: +1 (202) 422-2687
www.essentialaction.org/access/

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